What are Unliquidated Damages?
Damages for a party’s violation that are not pre-estimated are known as Unliquidated damages. In short, unliquidated damages are the damages demanded for unforeseen losses. Any breach of contract without a liquidated damages provision is subject to these damages. However, because the money is unliquidated, it is challenging to determine how much compensation the plaintiff would want. Once the court or arbitral tribunals have examined the plaintiff’s real loss or harm resulting from the violation, they award these damages. Unliquidated damages are determined by the aggrieved party’s real loss or injury. There can be three types of Unliquidated damages; Substantial Damages, Nominal Damages and Exemplary Damages.
Key Features of Unliquidated Damages:
- Section 73 of the Indian Contract Act 1872 addresses real losses incurred as a result of a contract breach and the harm that led to the breach, which falls under the category of Unliquidated damages.
- Unliquidated damages must have three elements: the plaintiff’s burden of evidence, causation, and violation of contract.
- Compensation for any distant or indirect loss or harm resulting from a breach is not payable under unliquidated damages.
Difference between Liquidated and Unliquidated Damages
Liquidated damages and Unliquidated damages are the two kinds of damage. Liquidated damages are pre-agreed compensation for contract breaches, while Unliquidated damages are determined by courts after a breach. When a defendant breaches a contract, the damaged party is often awarded the amount necessary to put them back in the financial situation they were expecting. But the only thing that sets one type apart from the other is the method used to determine the amount payable.
Understanding the distinction between these two types of damages is crucial in contractual agreements and legal disputes.
Table of Content
- What are Liquidated Damages?
- What are Unliquidated Damages?
- Difference between Liquidated and Unliquidated Damages
- Conclusion
- Difference Between Liquidated and Unliquidated Damages- FAQs